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Performance Preview – Februrary 2023

As we only have two trading days left in February, we thought providing our readers with a performance preview of the expected results would be helpful. Much can obviously change in the final 48 hours so any observation here is preliminary. Using our daily indices, we comment on the expected February hedge fund results.

In a month where the equity market lost traction, CTA shows its diversification worth by providing modest portfolio protection and positive returns.

Our latest estimate is that a diversified portfolio of Managed Futures managers is up around 1.5%. L/S equity gave up returns in line with equity markets. Event Driven and Market Neutral strategies seem to have fared better and will probably have positive returns for February 23.

NilssonHedge Daily CTA Index shows a small gain YTD and a positive February 2023 return.
The NilssonHedge CTA Index is likely to be positive in February

Directional Crypto Managers had a strong revival in January, but the result is likely to be more modest this month. With two days to go, Crypto Strategies are positive. The result is only +2% which is not even a significant move for directional Crypto positions.

Trend Followers have likely kept on reducing positions in Equities and Bonds (but likely still short or neutral in these market sectors), and partly establishing new short USD positions. This seems to have worked throughout February and CTAs are likely to have recovered the initial January drawdown. To get a glimpse of estimates of market sensitivities we have developed a page that is showing short-term correlation and beta estimates.

Since the inception of our Daily Indices, which has indeed been a very special period in Global Markets. CTA has better than other strategies. Equity L/S has lagged in equity markets but preserved capital as of late. Even Driven suffered from a lack of deal flows in 2022 (but also a lack of equity risk premia). As the Risk-Free rate increased the premiums available in the market have gotten larger. Market Neutral / Quant Equity is continuing to claw back the Value related drawdown that almost took out the strategy up until early 2021.

In Crypto Markets, the demise of FTX seems to have reduced volatility substantially. In itself an interesting observation. At this stage, we are not sure how to interpret it.

Our daily indices are freely available for download and the intereted analyst can dig into them.

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